Peter Burke (Longford-Westmeath, Fine Gael) | Oireachtas source

I thank the Leas-Chathaoirleach. I will now address amendment No. 19 as tabled by Senators Boyhan, Keogan and Norris, amendment No. 20 as tabled by Senators Higgins, Ruane and Black, together with amendment No. 22 as tabled by Senators Warfield, Boylan and others. Following on from the discussion on these points on Committee Stage, I certainly understand the positive intentions behind these amendments, which aim to limit rents to a certain proportion of an income, be that 30%, 33% or 35%, of a tenant's net monthly income. These are often used as rules of thumb for housing affordability, and are admirable aims.

However, as was stressed during the debate on Committee Stage, the proposals suggested in these amendments simply cannot form part of a sustainable financial model in which rents cover costs. That the rents charged cover the costs of provision of the homes is the core principle of cost rental, for which there seems to be a remarkable degree of support across the political spectrum. To put it simply, detaching rents from actual costs and linking them instead to income metrics absolutely is not cost rental. Rents that are linked to income, be it at 30%, 33% or 35%, introduce a fundamental uncertainty about whether the rents paid by tenants will actually cover the costs incurred in providing the homes. We have seen the sustainability challenges this presents in the case of differential rents for social housing. The cost rental model only works when landlords who provide the homes have a significant degree of certainty that the rents they are permitted to charge will cover the costs.

To move to an income-based rent would move away from the essence of what cost rental actually is. It would either see landlords make a loss on the provision of homes or require the State to commit to funding the difference between an income-linked rent and the actual cost rent on an open-market basis into the future. It is intended that the majority of cost rental developments will be State-supported by means of upfront one-off capital subsidies, such as the cost rental equity loan or the serviced sites fund, and-or the provision of State land at no cost.

The requirement for an ongoing, current State subvention to the cost rental sector, which would depend on the varying income of the individual tenants, would create a requirement for additional State funds to be used to subvent these homes on an annual basis. This would be directly contrary to the self-financing element of cost rental, which will allow the model to be scaled up to deliver homes for a significant number of households. Simply put, accepting these amendments would require the ongoing commitment of additional State funds on a variable basis, in addition to the already significant capital funds planned at the outset.Given the additional financial commitment, this would constrict the amount of cost-rental homes that could be developed and therefore reduce the impact that the sector will have on the overall rental market. For these reasons, we cannot accept the amendments.

I will add a few more points in response to what the Senators said. With regard to Part V, I should point out, in reference to 20% on all public lands, that under the Land Development Agency Bill there is a minimum of 50% designated affordable on public lands plus 20% social and affordable. That amounts to 70%, and the Minister has said he will have power under that Bill to increase it to 100% in many areas, including Dublin. That is on the record.

Second, we all know that the only way to increase affordability, reduce rents and give everyone a chance to get a home is to increase supply. The Government is keenly focused on getting far more high-quality, sustainable homes onto the market. Obviously, it is key that first-time buyers can access them. The State is delivering them through the LDA, as has been discussed many times. Many people quote the example of Austria. In Austria, the debt financed on cost-rental by the banks is quite significant for new homes. The Minister has spoken about the limited return. We have heard Deputy Ó Broin and others say that they want to get low-risk pension funds that can plan a modest return into the market because that will deliver more quality, cost-rental homes which are sustainable and whose rents are reasonable at below 30% of market value. That is the target; that is what we want.

The Minister is on record that in the first instance, and this is where people are missing the point, there will not be a huge amount of private sector investment in this because the methodology is not yet proven. We are trying to provide the best legislation to give cost-rental in this country the best chance of success, learning from the pathways on which other European countries have embarked. If the State can prove that this model works and can deliver high-quality, affordable cost-rental homes below market value, then potentially other investors or low-risk pension funds may come into the marketplace. That is what we want to increase the number of units on the ground, because the State cannot take everything on its shoulders. It has so many demands. We have a record budget for housing, but we can only go so far, so there is a great urgency to do that.

This will be reviewed. We are at pains to make that key point. Once we can prove that this model works, and the State will be key in doing that, people will feel the benefit of it. The key point is that it is starting this year. There are homes on the ground this year that families will have keys to and can have certainty about cost-rental.